19/11/21

UK: IHT receipts up £0.6bn, HMRC data reveals.

As published on professionaladviser.com, Friday 19 November, 2021.

The latest figures from HMRC have revealed a £0.6bn increase in inheritance tax (IHT) receipts in the first half of 2021/22 than in the same period a year earlier.

The government data showed £3.6bn collected was between April and October 2021, a 20% increase on the same period a year earlier. There were dramatically lower receipts at the beginning of the 2020-21 tax year due to a temporary issue with HMRC in relation to Covid-19. This was later resolved.

HMRC said higher receipts were expected in October 2020, November 2020, and March to August 2021, "due to higher volumes of wealth transfers that took place during the Covid-19 pandemic". However, it said it could not verify that until full administrative data is available.

Shaun Moore, tax and financial planning expert at Quilter, said one factor likely contributing to the increase in IHT receipts is the soaring housing market. Despite the stamp duty holiday drawing to a close at the end of September, he said, the race for space continues and this week's Office for National Statistics data showed a record high average UK house price of £270,000.

He added: "With inheritance tax thresholds frozen, which is viewed as a stealth tax rise, more people will be facing IHT bills following the sales of their homes."

"This tax year, you can pass on £175,000 of your property tax-free, which is effectively doubled to £350,000 when combined with the allowance of your spouse or civil partner. That's layered on top of your inheritance tax allowance - or nil rate band - of £325,000, meaning it is possible to pass on £1m inheritance free as a couple."

Smith & Williamson head of national tax Ami Jack said: "Following the Chancellor's extensive spending commitments announced in the recent Budget, the Treasury needs to do everything it can to boost its coffers to pay for the plans. The continuing year-on-year rises in IHT collections will therefore be welcomed by the Treasury.

"With the outlook for personal taxes uncertain, people should continue to carefully consider their tax planning and make the most of current allowances before any further possible changes are introduced. By considering options such as making gifts and investing tax-efficiently, there are a number of areas of tax planning that may help reduce an IHT bill."